Who will own our homes in 2000 AD?;

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The Crisis in Housing
WHO WILL OWN OUR HOMES IN 2000 AD?
By THOMAS P. GALLAGHER/Senior Consultant, Washington, D.C.
Partly obscured by the economic turmoil of today's
recession, there are unmistakable signals of change being
sent up within the housing industry. These changes will
affect the industry more profoundly than short-term
credit cycles and the fluctuations in housing starts which
now command our attention.
By the turn of the century, in fact, it is conceivable that
we may see a situation something like this:
• The free-standing single-family home, which once
accounted for more than 90 percent of all new housing
starts, will have been largely replaced by multiple-family
dwellings consisting of five or more units.
• A large and growing proportion of the nation's
housing, both single-family and multifamily, will be
owned by financial institutions, pension funds, govern­ment
housing authorities, and special chartered cor­porations.
• Rents in most metropolitan areas of the country will
be controlled by a municipal or regional authority.
• The mortgage will have virtually disappeared as an
instrument of housing finance, because capital will be
drawn away to finance energy production and other high
return business activities.
In the past four years, the Washington office of Touche
Ross has conducted several studies of the nation's
multifamily housing industry. The studies have identified
several emergent problems which raise serious questions
regarding the future of the nation's housing stock and of
traditional ownership vehicles. Based on these studies,
this article presents one possible course of industry
development over the next 25 years.
It is not the intention here to predict what this course
will be. Rather, it is to speculate about who will own the
housing we live in, assuming the housing industry devel­ops
in one of several possible ways, and to wonder, in a
structured way, about the impact of that type of
ownership on government.
A Growing Trend
The changes which are afoot in the housing industry may
well affect both the physical characteristics of housing to
be built in the next 25 years and the characteristics of
those who will own such a housing stock.
The changing characteristics of housing may be plainly
read in the accompanying table, which traces housing
starts from 1951 and compares single-family starts
(buildings with 1-4 units) to multifamily starts (buildings
with 5 units or more).
As is apparent from the table, multifamily housing has
risen from 5 percent of all starts between 1951 and 1955 to
45 percent of all starts in 1973. If projections of the
Federal Energy Administration (FEA) prove accurate, in
the light of energy needs, housing starts in the 1980s will
be predominantly multifamily. As the FEA pointed out in
its 1974 Blueprint for Project Independence: "The major
effect of high oil prices is to intensify an emerging shift
from single family homes to multiple dwellings and
mobile homes, [in part because] new single family
construction frequently must take place large distances
from central city employment locations and, with high
energy prices, the cost of transportation becomes impor­tant."
Contributing to the shift toward multifamily construc­tion
are several other factors:
Increasing housing costs—A house which cost $25,000
in 1968 cost almost $36,000 in 1974, an increase of
approximately 45 percent in six years. A growing number
of American families discover each year that home-ownership
is an expense beyond their capability.
Scarcities of developable land—As a result of the
explosive growth of the suburbs since World War II,
sending developers farther and farther from urban
HOUSING STARTS
ACTUAL AND PROJECTED
1951-1985
(In thousands of units—excludes mobile homes)
1951 - 1955
1956 - 1960
1961 - 1965
1966 - 1970
1971
1972
1973
Projected
1977
1985
Total
Starts
7,427
6,539
7,258
6,759
2,052
2,379
2,057
1,790
1,690
Single
Family
7,066
5,833
5,273
4,424
1,271
1,309
1,132
690
490
Multi-
Family
361
706
1,985
2,335
781
1,070
925
1,100
1,200
Multi-
Family
5%
11%
27%
35%
38%
45%
45%
61%
71%
Production data for the period 1951-1973 is from the U.S.
Department of Housing and Urban Development.
Projections are based on data prepared by the Federal Energy
Administration to evaluate the impact of a major effort to
develop domestic fuel resources.